Microfinance Programs and Women

By Alexis Phillips

Today’s foreign aid programs look radically different from those of the 1970’s. Gone are the days when funds were simply handed over to countries, with little demonstrated concern for the long-term benefits or the percentage of aid that actually ended up in the hands of those in need. With new systems of gathering metrics, today’s NGOs are subject to the same interrogations that businesses are. Like financial investors, NGO administrators utilize cost-benefit analysis strategies in order to make sure that they are not simply spending, but investing (Gates 2013).

Microfinance, particularly women’s microfinance, is hailed as one of the most profitable aid investment strategies in poor countries. These programs provide low-income (often rural) women with the low-interest loans that they need to start their own small businesses (Kiva 2015). This way, individuals learn how to utilize the principles of supply and demand, how to budget, and how to participate in the formal economy. With these skills, proponents believe that participants will be able to gradually lift themselves out of poverty (Kiva 2015).

With this in mind, in 2007, a group of professional women in the Washington D.C. area founded Women’s Microfinance Initiative (WMI). WMI supplies low-interest, no collateral loans to women in rural Uganda, Kenya, and Tanzania. In order to receive the loans, women are required to attend a series of workshops that educate them on basic economic concepts and help them to understand financial terms. At these workshops, the women are afforded peer-to-peer mentoring, calculators, notebooks, and, at some locations, access to an internet cafe. When the women graduate from the program, they receive loans from a private bank, and thus, become a part of a formal economy that was once a rich-only, male-only domain. WMI believes that it has helped the commercial banking sector “realize it is overlooking a viable and valuable sector” of the economy by neglecting women and rural communities (WMI 2013). According to the testimonials published by WMI, before receiving aid from this program, most participants could only hope to earn enough to cover their families’ most basic needs. However, graduates of WMI’s two-year training program are said to have achieved a higher standard of living by starting profitable small businesses.

Kiva is another microfinance organization that claims to promote economic advancement. With funding from nearly 1.3 million lenders, the initiative has provided $672 million in loans to over 1.5 million women in 86 countries. While these statistics indicate success, Kiva places greater emphasis on its role in empowering women economically and socially. The non-profit claims to “send a strong message to households as well as to communities,” by increasing women’s assertiveness, confidence, and visibility (Kiva 2015). As evidence, they supply the testimony of Rose Athieno, a Ugandan produce reseller: “Today I’m a very respected woman in the community…Due to the loan that I received…you have made me to be a champion out of nobody” (Kiva 2015).

In spite of these glowing testimonials not everyone is equally convinced of the social and economic benefits of women’s microfinance. While quantitative and qualitative studies from individual organizations claim that it is an effective tool for the alleviation of poverty and the advancement of women, data gathered by independent researchers isn’t conclusive enough to make those claims. According to the study, “Six Randomized Evaluations of Microcredit,” the “evidentiary basis for anointing microcredit [is] quite thin”; there is a “lack of evidence of transformative effects on the average borrower” (Banerjee et. al 2015, 2,3). Also, the largest and most acclaimed microfinance programs often do not extend their services to the “poorest of the poor,” although such families are the most likely to be headed by women (Hunt, Kasynathan 2002, 73).

Skeptics also question whether the economic empowerment that microfinance initiatives claim to provide actually diminishes gender inequality. Access to credit does not ensure that women have control over the loan money; husbands and other family members may, and often do, seize the money and use it for their own benefit (Hunt, Kasynathan 2002, 73). In their article “Reflections on Microfinance and Women’s Empowerment,” Juliet Hunt and Nalini Kasyathan report an incident in which a woman’s husband beat her so that she would ask for more funds (Hunt, Kasynathan 2002, 73).

To avoid such tragedies from occurring, scholars advise, firstly, “clari[fying] the underlying vision” of microfinance programmes, and then “improv[ing their] design and monitoring” (Mayoux 2002, 78;Hunt, Kasynathan 2002, 73). Administrators must ask themselves whether the programs that they provide are primarily meant to address poverty or to empower women. The answer to this question can be used to inform the organization’s operational decisions. For example, if female empowerment is the primary goal, instead of simply loaning money, it may be beneficial to help women to open secure savings accounts. This would allow participants to set aside money for personal purchases, and it would give them a buffer in case they need to leave an abusive relationship (Mayoux 2002, 78).

Organizations addressing global poverty must remember that there is often a large disparity between expectation and realityㄧoperations that should work in theory may be complicated by social, political, cultural, and economic factors on the ground. The challenge for non-profit administrators is to anticipate some of these confounds and try to mitigate or work around them. Luckily, with greater accountability standards, as well as better means of gathering metrics and conducting cost-benefit analysis, NGOs will be pushed to find the perfect balance in serving impoverished women.


Banerjee, Abhijit, Dean Karlan and Jonathan Zinman. “Six Randomized Evaluations of Microcredit: Introduction and Further Steps.” American Economic Journal: Applied Economics 2015 7 (2015): 1-21. Accessed February 16, 2015. http://dx.doi.org/10.1257/app.20140287.

Hunt, Juliet and Nalini Kasynathan. “Reflections on Microfinance and Women’s Empowerment.” Development Bulletin 57 (2002): 71-75. Accessed February 16, 2015. http://hdl.handle.net/1885/9482

Gates, Bill. 2013. “Bill Gates: My Plan to Fix the World’s Biggest Problems.” The Wall Street Journal, January 25. Accessed February 18, 2015. http://www.wsj.com/articles/SB10001424127887323539804578261780648285770

Kiva. 2015. “About Microfinance.” Last Modified 2015. Accessed 17 Feb 2015. http://www.kiva.org/about/microfinance

Mayoux, Linda. “Microfinance and Women’s Empowerment: Rethinking ‘Best Practice.’” Development Bulletin 57 (2002): 76-80. Accessed February 16, 2015. http://hdl.handle.net/1885/9482

Women’s Microfinance Initiative. 2013. “WMI 2013 Annual Report.” Last Modified 2013. Accessed 30 November 2014. http://wmionline.org/2013-WMI-Annual-Report.pdf

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